The ‘business of beneficence’

To date the Foundation works heavily through partners (nongovernmental organisations, usually) and has focused on big causes. The foundation can now broadened its efforts to global health, on which it now spends around 60 per cent of its funds. (Much of that is targeted at diseases regarded to be “the big three major killers: malaria, HIV-AIDS, and tuberculosis).

Also the Gates Foundation is moving beyond the pure medicine dimensions of health into agriculture and micro-financing and will inevitably find itself in the business of promoting social infrastructure, open markets, the rule of law and transparent and corruption-free administration.

Yet, if this were an industry merger, the antitrust authorities would be quick to raise the alarm and investigate the effect of the deal on competition. Fortunately, in terms of charitable entities, even with the enhanced contributions of Buffett, the Gates Foundation is not a substantial competitor. This is because the approximate $3 billion a year that the Foundation is intended to spend is only 1 per cent of the $260 billion of annual charitable giving in the United States.

Not withstanding the fact that this sizable gift is still only a fraction of the total, the Bill & Melinda Gates Foundation is nevertheless, by far the largest foundation in the world, even before Warren Buffett's historic gifts. It is more than five times the size of the $11 billion Ford Foundation. In size terms the $1.36 billion spent by the Gates Foundation last year, came pretty close to the entire $1.66 billion budgeted by the World Health Organization for this year.

Naturally the gifts have had US tax lawyers working over time to assess what is the benefit of the merger to the two richest men in America. Undoubtedly while the money is given away, the trustees still maintain control over how it is spent. Hugh Freund, a leading New York estate tax lawyer and planner, points out that although the foundations are required to dispose of 5 per cent of their assets every year, they will not fade away, as they generally earn enough to refresh their balance sheets and have a perpetual life.

So too the gifts have had policy analysts assessing what this means in terms of political influence and the capacity of the Foundation to set the aid agenda. There is always the concern, and the possibility that charities on this scale might eventually throw their weight behind causes primarily appealing to one or another side in policy disputes that are essentially political in nature.

Also not all sectors of the community, or for that matter cultural and interest groups, will be comfortable with philanthropic foundations promoting western values of freedom, technological progress and entrepreneurship to solve the world's underlying problems. This highlights the fact that private foundations are answerable only to themselves and what is politically expedient.

Taxation and policy considerations aside, Warren Buffett and Bill Gates are contributing to the net global benefit, in the grand tradition of American private philanthropy. They will undoubtedly do much good and improve the lives of millions of people.

Let face it - there should be more of it. The tradition of philanthropy in the United States deserves emulation in other countries. In the UK only one person in the top 30 richest persons, (Lord Sainsbury), is also in the top 30 givers list. Most philanthropists would still rather donate to elite schools, concert halls or religious groups than help the poor or sick and this needs to change.

The marriage of Buffett and Gates fortunes was a truly a momentous event, and marks a serious coming of age of entrepreneurial philanthropy. A new breed of philanthropists are seeking to maximise the social impact of their actions, and applying their skills in business - to the work of doing good. Even though it leaves the world hanging on the question whether there will be offspring remotely tall enough to do their parents proud.

Yet as the Gates Foundation grows in size and ambition, it will raise questions about how it and others like it will fit into the world of policy making and address problems that have hither too been the reserve of multilateral institutions, non-governmental organisations and governments themselves. With this greater role will come demands for greater accountability.

While no philanthropist has solved a worldwide problem since Carnegie brought universal access for the poor to books via libraries, and Rockefeller used his billions to fund the research that would lead to the eradication of polio, the tantalising prospect is that entrepreneurial philanthropy, by investing in social change can bring about innovation, efficiency in the redistribution of resources to solve intractable global problems.

It is a welcome development, that may well herald a global trend towards modernising the concept of philanthropy or what Rockefeller called the “business of beneficence.”